Updating post from Reddit.
Hi Everyone,
We own a house in London which we rent out to friends under one AST.
Its always been our policy that if we get good tenants we don't raise rents in line with the market. We've had this group of friends at our place coming upt to 2 years now and they've been good. No issues, rent paid on time. They may be a little messy but they're not dirty. We have not increased rent since they moved in.
However the market rent has jumped from around £2975 to £3450 according to the agent. At the same time out insurance costs have tripled and we just had to licence the property with the council which was also expensive.
We've asked them for a small increase to bring them to £3200 but they've declined, saying what they've paid is the max they can afford and although they love the house and want to stay, any increase would be too much. They claim they're paying approximately 50% of their earnings on rent.
From those more experienced and wiser, what would you do? We've arranged to meet them again this week to come back to them and to show them our increased costs and try to renegotiate. We expect if they move we may lose a months worth of rent plus any costs relating to freshening the place up. There is also the unknown of who you'll get in next!
Any advice would be appreciated.
What's your breakdown of costs?
You're asking for an additional £2700 per year. I wouldn't really call that a small increase.
What advice do you want? It seems you already know the pros and cons. It’s your appetite for risk which should determine whether you want to try with new tenants at a higher rent.
I would also calculate how long, at the increased rent it will take you to earn back the lost rent plus the cost of turnover plus you may be paying a finders fee to your agent (mine is 1 month fee). Then you have the added risk of an unknown tenancy. I think the value of a known tenant that is caring for your property outweighs the potential gain.
100%
Thanks
I’d be very wary of the agent claiming the rent has jumped 17% in two years - that’s double inflation. £3200 is probably closer to the actual market rate you’d achieve if relet. I’d imagine the agent is hoping for higher fees to be paid.
Though £200 a month is a large increase - it’s 8% which is slightly higher than the last 2 years cumulative inflation. Your tenants may have got 3-4% before tax, so 2% after tax increases in their salaries. May have got 0%. Can see why they’d say this is unaffordable
>Its always been our policy that if we get good tenants we don't raise rents in line with the market.
However the market rent has jumped from around £2975 to £3450 according to the agent.... We've asked them for a small increase to bring them to £3200
You're asking for a 7.5% increase or £2700... because your insurance went up a few hundred and you had to pay a one-off fee of several hundred that covers you for 5 years?
At least be honest. You ARE being tempted to raise rents purely on the back of what your agent has said. You kind of deserve the empty months, updating costs, and paying the agent's finder fee again if you fall for that. The only party that really benefits from tenant churn is the agent.
Yeah this is hilariously disingenuous. "were good landlords who would never raise rent for good tenants, but we would like to get an extra £2.7k now someone's whispered the possibility in our ears."
As they are friends suggest you look on rightmove and provide comparables so your friends can see what the competition is in your area. Ultimately it will become a test of friendship !
Apologies as you're not the only one who has interpreted what I wrote to mean that, what I meant was they are a group of friends in 1 tenancy, but we didnt know them, the EA found them.
Phew !
Is the property highly desirable and easy to let?
Are the tenants worth keeping in view of the drop in revenue?
I would personally end tenancy and get the highest rent you can but understand it can be difficult if your tenants are friends. What are they paying now?
I would compromise by giving them another 6-12 months at existing rent; after that they would need to understand that you need to charge market rent, irrespective of whoever the tenant may be.
ps: never rent to friends
Sorry just to clarify, they are a group of friends in 1 tenancy, but we didnt know them, the EA found them.
Ah, ok. Still you could give them another six months but let them know you’re reviewing the rent after that.